Please review my newish retiree T Bill plan (vs other vehicles?)

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Please review my newish retiree T Bill plan (vs other vehicles?)

Post by DebiT »

Hi all. I am still learning how to do this being retired thing, and have got most aspects comfortable now, including how to pay my bills. Now I'd like to squeeze a little more return out of my cash by using T Bills. I made a spreadsheet to see how this looks in terms of having enough actual cash on hand month by month, and it looks good to me.

Basically I want to always have 2 years of cash at the beginning of each year, and replenish that annually with a withdrawal from my taxable account. I'm 65, currently invested at 40/60, and at today's valuations have 16 years in fixed income and 27 years in my total portfolio. When I do my annual withdrawal from taxable, I would be selling stock there and then rebalancing my AA by buying stock in my tIRA. My plan is do this regardless of whether BND is still down, in service of keeping 2 years of cash. That means that functionally 1 year of cash will "never" get used, so I plan to buy 2 T Bills now (half each of one years expenses each, for flexibility) that mature around the end of the year (if possible), and then every year around the first to re-purchase 2 52-week TBills if that is still a good idea.

Currently my 2nd year cash is in SWVXX, a Schwab money market fund. It should be noted that Schwab doesn't do sweep funds, so right now, to replenish my cash I have to take action to sell SWVXX. That irritates me, because almost every other aspect of my finances is now automatic, with Schwab pushing cash to my Wells Fargo account to pay bills. So one benefit of my plan below is that I will automatically have cash getting refreshed.

Right this moment I have about 10 months of actual cash. My plan is very soonto buy about 3 mos worth of a 12 week TBill, so it will mature about 11/1. Then in December or January when I make my annual withdrawal, I would basically divide it in 4 parts. 1 part would stay cash, 1 part each in a 13, 26, and 52 week TBill. As each of these would mature, they would replenish my cash. I especially like this because it buys my kids time to figure things out if I'm in a coma (dead is easy, coma means I don't want a mess when I'm back on my feet).

I ran a spreadsheet out until the beginning of 2024, and it looks like this will keep my keep me happy, with never less than 3 mos of actual cash, sometimes as much as 5. So on a cash flow basis the mechanics work, and I have the benefit of automatic "sells" when a TBill matures, which I can't get otherwise at Schwab. I gain about $1000 yearly of interest over SWVXX for my 2nd year money, and about $566 in 2022-2023 for the rest of the money, if it were all currently invested in SWVXX. The differential is larger when I realize that some of this has been in actual cash for quite a while now. It's not a lot of gain, but hey, I wouldn't leave it lying on the ground if I came across it either.

My questions here are:

1. Does anyone see any flaws to this?

2. If I want a very close to cash equivalent, no risk at all of principal loss for this essentially 1 year money, is there anything significantly better to do with it?

3. I assume each year I would continue to compare SWVXX with Tbills, and with perhaps short term CDs, to see what would be best. Is that correct, or missing anything?

Thanks for any feedback. I really appreciate the opportunity to "think out loud" here, and then get feedback. It is so very helpful!
Age 64, life turned upside down 3/2/19, thanking God for what I've learned from this group.
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Joined: Thu Sep 29, 2016 1:36 pm
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Re: Please review my newish retiree T Bill plan (vs other vehicles?)

Post by eldinerocheapo »

Hello, I'm 64 and retired a little over two years. My system is somewhat similar to yours with a few variations. Since I'm buying my T bills straight from Treasury Direct, I like to keep my interactions to a minimum since I find the website less than user friendly. So, I cashed in all my no penalty cd's at Ally, and transferred them to the Ally savings account paying around 1%. Then, with the proceeds, I've invested $10k in Series I bond annually for myself and gifted my wife the same amount at a six month return of about 9.12%. Next, I'm buying one year T bills each month for $15k and will ladder these out for five years at around 3% per year. I will layer these in to our income stream as needed throughout retirement. Finally, I'm converting TIRA's to Roth IRA's with the original Ally proceeds to remain in the 12% taxable space while still having a sizeable and liquid emergency fund to pull from monthly, and pay estimated taxes, and future Roth contributions ( my wife still works p/t). No SS yet, and the TIRA distribution is around $15k annually.

So, my advice would be to get the longest maturity you can handle in T Bills to avoid having too many bonds to look after, and receive a higher rate of return via the 52 week bills. Take a look at the Series I bonds too. Hope this helps.
"Dream, Dare, Do."
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